will further bank regulation torpedo the economy even further?

#26
#26
BigPapaVol said:
they can only charge a very limited amount. In fact, the transition to free is because the service has become so turnkey that it's easy to replicate.

Banks, as community lenders, are the backbone to our capitalist culture. Without them, your average guy has no access to the capital markets whatsoever. Just because they've ceased lending today because of inverted capital bases doesn't mean the system wasn't a good one. Any system unchecked for too long becomes a place for loophole money makers. Unfortunately, the loopholes became the standard, but won't do so again in the housing market for decades and decades.
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I disagree. Banks don't operate under capitalist/free market circumstances. They are given special privileges and advantages that benefit the banks, not the general public (but it's always spun as if it were to benefit the public). Banks are a necessary and an organic element of a free market (you may even say "backbone"), but as is, our banking system is not necessary, IMO.

I would contend that our banking system is responsible for surges in housing costs (specifically owning a home). Yeah maybe more people are getting mortgages, but lending has not made genuine home ownership more feasible and might even be counterproductive.
 
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#27
#27
droski said:
if they knew they wouldn't be paid back then why did they hold hundreds of billions of these loans on their balance sheets (including instruments that cost them billions if these loans defaulted)? doesn't seem very bright does it?
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They loaned out large sums money to lower income families with almost 0 down. Not bright, you're correct.

For making such great moves - they've been awarded severance.
 
#28
#28
droski said:
if they knew they wouldn't be paid back then why did they hold hundreds of billions of these loans on their balance sheets (including instruments that cost them billions if these loans defaulted)? doesn't seem very bright does it?
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Was there not a lot of shorting going on too though? People knew before the collapse this was a huge house of cards about to implode.
 
#29
#29
VolsNSkinsFan said:
fyp
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If the banks were lending, why wouldn't they? Since when does the consumer need to regulate the banks. We keep hearing they are the smart ones, the talent, etc.

Blame can be passed around to everybody, but the bottom line is the banks didn't have to lend the money. Just like the consumer, they didn't want to look past the dollar waving 6 inches in front of their faces.
 
#30
#30
volinbham said:
So we keep hearing that banks aren't lending but clearly they are - just not at the rate they were prior to the recession.

Anyone have any data on how big the drop in lending is (particularly relative to demand).
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two factors in the banks not lending. first their balance sheets are still filled with a lot of garbage and they are keeping reserves for that and second the fear of future regulation. if you think you might have to double your capital requirements would you lend that money out? of course not. the last thing they would want to have to do is further dilute their equity because they don't have enough money on hand to meet the new requirements.
 
#31
#31
KiffinKiller said:
They loaned out large sums money to lower income families with almost 0 down. Not bright, you're correct.

For making such great moves - they've been awarded severance.
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and they've been fired and their stock and many of their retirment savings are worth close to zero. the number of people who walked away with millions is a handful. the number of people who worked for the banks and got completely screwed is in the hundreds of thousands.
 
#32
#32
rjd970 said:
Was there not a lot of shorting going on too though? People knew before the collapse this was a huge house of cards about to implode.
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goldman shorted once they realized the market was collapsing which basically bailed out their already massive long position. net i'm not sure they made any money. none of the major banks shorted. or least not materially. some hedge funds shorted and made a fortune though.
 
#33
#33
rjd970 said:
Was there not a lot of shorting going on too though? People knew before the collapse this was a huge house of cards about to implode.
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you can count the people who had a clue prior to the collapse on one hand

If the banks were lending, why wouldn't they? Since when does the consumer need to regulate the banks. We keep hearing they are the smart ones, the talent, etc.

Blame can be passed around to everybody, but the bottom line is the banks didn't have to lend the money. Just like the consumer, they didn't want to look past the dollar waving 6 inches in front of their faces.
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People need to step up and assume some responsibility. A maid making $30K a year should realize that she cant afford 5 $500K townhouses. Pure greed on their part
 
#35
#35
KiffinKiller said:
This was my understanding. It's incredible that those in charge weren't charged.
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your understand is wrong. if they all made a fortune on shorting why did the banks have to bailed out? does not compute.

charged with what exactly? if you want to charge people with faking incomes for loans be my guest. mozillo at countrywide should definetely be in jail. but i'm not sure what the banks did that was illegal. just stupid.
 
#36
#36
droski said:
two factors in the banks not lending. first their balance sheets are still filled with a lot of garbage and they are keeping reserves for that and second the fear of future regulation. if you think you might have to double your capital requirements would you lend that money out? of course not. the last thing they would want to have to do is further dilute their equity because they don't have enough money on hand to meet the new requirements.
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I understand the reasons - I'm just trying to get a handle on the impact. Clearly, lending is still occurring. Overall lending is down but I would imagine demand is as well. I'm trying to get a clearer picture of how much lending is actually down (relative to demand drops).
 
#38
#38
volinbham said:
I understand the reasons - I'm just trying to get a handle on the impact. Clearly, lending is still occurring. Overall lending is down but I would imagine demand is as well. I'm trying to get a clearer picture of how much lending is actually down (relative to demand drops).
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just from talking to people it does appear demand is much greater than supply. the banks loans are very profitable with rates at their current levels, and considering how much leverage the banks have against the borrower in this market, so i don't think that is the problem.
 
#39
#39
VolsNSkinsFan said:
People need to step up and assume some responsibility. A maid making $30K a year should realize that she cant afford 5 $500K townhouses. Pure greed on their part
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that's only true if personal responsibility existed in the US and there wasn't always a boogieman in the closet
 
#40
#40
nbakerld said:
I disagree. Banks don't operate under capitalist/free market circumstances. They are given special privileges and advantages that benefit the banks, not the general public (but it's always spun as if it were to benefit the public). Banks are a necessary and an organic element of a free market (you may even say "backbone"), but as is, our banking system is not necessary, IMO.

I would contend that our banking system is responsible for surges in housing costs (specifically owning a home). Yeah maybe more people are getting mortgages, but lending has not made genuine home ownership more feasible and might even be counterproductive.
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what? Maybe you don't understand that small business wouldn't exist without community banks. As to their privileges, I don't know them. Most, in good times, knock down about a 10% ROE, and that's at current Tier 1 capital ratios.
 
#41
#41
utvolpj said:
that's only true if personal responsibility existed in the US and there wasn't always a boogieman in the closet
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and in this case the boogieman has been the banks while in reality everyone screwed up (govt by encouraging low income lending, banks by underwriting said loans, individuals for buying houses they couldnt' afford).
 
#42
#42
Greedy bankers are going to behave greedily. Greedy consumers are going to behave greedily. Government facilitated their irresponsible behavior through lending incentives, and also the perception that because the financial sector is so heavily regulated, loans that are executed are going to be compliant with regulation, general ethics, and common sense.
 
#44
#44
VolsNSkinsFan said:
People need to step up and assume some responsibility. A maid making $30K a year should realize that she cant afford 5 $500K townhouses. Pure greed on their part
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It's like a company giving their product out for free, then when they go under, blaming the consumer for taking the free goods.

Looking at what happened at the major banks, the underwriting for loans...etc...it is especially rich you can sit there and say it was "pure greed" on the consumer side and not even make a passing mention of the lending side.
 
#45
#45
volinbham said:
I understand the reasons - I'm just trying to get a handle on the impact. Clearly, lending is still occurring. Overall lending is down but I would imagine demand is as well. I'm trying to get a clearer picture of how much lending is actually down (relative to demand drops).
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I don't know the numbers, but I would guess that new loan origination is down 85% from the peak.
 
#46
#46
droski said:
your understand is wrong. if they all made a fortune on shorting why did the banks have to bailed out? does not compute.

charged with what exactly? if you want to charge people with faking incomes for loans be my guest. mozillo at countrywide should definetely be in jail. but i'm not sure what the banks did that was illegal. just stupid.
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I didn't intend to say they made a fortune. I just said some of those responsible received severance pay...for ruining millions of lives.
 
#47
#47
KiffinKiller said:
I didn't intend to say they made a fortune. I just said some of those responsible received severance pay...for ruining millions of lives.
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this is generally a misconception. Those heading up the units generating these losses were summarily canned.
 
#48
#48
BigPapaVol said:
what? Maybe you don't understand that small business wouldn't exist without community banks. As to their privileges, I don't know them. Most, in good times, knock down about a 10% ROE, and that's at current Tier 1 capital ratios.
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Maybe you don't understand that loans to small businesses would still exist outside of the current system.

As far as privileges go: the law says that FDIC banks are the only entities that can practice fractionalized banking. That's a huge advantage. So they take money from you and I...lend it right back to us...and then the bank is FDIC insured ultimately by you and I (the taxpayer). I'd say they enjoy privilege.
 
#49
#49
KiffinKiller said:
I didn't intend to say they made a fortune. I just said some of those responsible received severance pay...for ruining millions of lives.
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if you want to argue that compensation for execs should be more stock based i don't disagree. still not seeing the criminal aspect. we had at least a decade of these practices going on before it blew up. at what point are the bank execs supposed to have gone "oh crap it's going to blow up so i'm going to stop doing it."? at some point, as with all bubbles, people started to convince themselves it would never end. obviously if they knew it would blow up they would have dumped all the loans on their balance sheets. now obviously a lot of fraud was going on in underwriting, but most of that wasn't done by the banks.
 
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